Slippage - Trading Glossary

Slippage occurs when there’s a difference between the expected price of a trade and the price at which the trade actually executes. This is particularly important on pump.fun where token liquidity can vary dramatically.

How Slippage Works

Slippage happens because:

• Order book depth may be insufficient for your trade size
• Price moves between order placement and execution
• Market volatility creates rapid price changes
• Competition from other traders or bots

Types of Slippage

Positive Slippage:

• Better execution than expected price
• Market moves favorably during order processing
• Less common but beneficial when it occurs

Negative Slippage:

• Worse execution than expected price
• More common especially in volatile markets
• Costs traders money through unfavorable fills

Slippage on pump.fun

pump.fun slippage characteristics:

• Bonding curve pricing provides some predictability
• Low liquidity in early stages causes high slippage
• Large orders can significantly move price
• MEV bots may front-run your transactions

Factors Affecting Slippage

Market Conditions:

• Volatility level - higher volatility = more slippage
• Trading volume - low volume increases slippage risk
• Market cap size - smaller tokens have higher slippage
• Time of day - peak trading hours may increase slippage

Trade Characteristics:

• Order size - larger orders experience more slippage
• Order type - market orders vs. limit orders
• Execution speed - faster execution may reduce slippage
• Gas fees - higher fees for priority execution

Measuring Slippage

Slippage calculation:

Slippage % = ((Execution Price - Expected Price) / Expected Price) × 100

Example:

• Expected price: $0.100
• Actual execution: $0.105
• Slippage: 5%

Slippage Settings

Most platforms allow slippage tolerance settings:

• 0.1-0.5%: Very tight, may cause failed transactions
• 0.5-1%: Standard for stable markets
• 1-3%: Common for volatile tokens
• 3-10%: High volatility or low liquidity tokens
• 10%+: Extremely volatile or illiquid situations

Minimizing Slippage

Trade Size Management:

• Break large orders into smaller chunks
• Time entries during high liquidity periods
• Use limit orders when possible
• Monitor market depth before placing orders

Platform Selection:

• Choose platforms with better liquidity
• Use aggregators that split orders across venues
• Consider MEV protection services
• Compare execution across different platforms

Slippage vs. Price Impact

Important distinction:

• Slippage: Unexpected price difference at execution
• Price Impact: Expected price movement from your trade
• Both affect your final execution price
• Price impact is predictable, slippage is not

MEV and Slippage

Front-running Bots:

• See your transaction in mempool
• Place orders before yours executes
• Cause additional slippage beyond market conditions
• MEV protection can help reduce this

Advanced Slippage Strategies

Professional Techniques:

• Dark pools for large orders
• Time-weighted average price execution
• Flash loan arbitrage protection
• Private mempools to avoid front-running

Risk Management

Slippage Protection:

• Set maximum slippage tolerance
• Use stop-loss orders appropriately
• Monitor execution quality over time
• Factor slippage costs into profit calculations

Platform Comparison

Different platforms handle slippage differently:

• pump.fun: Bonding curve provides predictable slippage
• Raydium: Traditional AMM with variable slippage
• Jupiter: Aggregates routes to minimize slippage
• Trading bots: May have better execution algorithms

Remember: Slippage is a normal part of trading, especially in volatile crypto markets. The key is understanding when it’s reasonable and when it indicates poor execution or market manipulation.